Take advantage of free Africa trade

President Uhuru Kenyatta when he met the African Union delegation, which was in the country to evaluate Kenya’s bid to host the African Continental Free Trade Area headquarters on May 23. PHOTO | PSCU

It will soon be easier for Kenyan businesses to export goods and services to the rest of the continent once the African Continental Free Trade Agreement ( AfCFTA) is operational.

The pact is also set to open up the Kenyan market to an influx of imports from other African countries.

The AfCFTA is a pact 44 African countries signed last year, establishing the largest Free Trade Area in the world in terms of the number of participating countries and the population.

A free trade agreement is one entered into by several nations to open up their markets by reducing or abolishing tariffs on imports and other barriers, for example, stringent licensing requirements for foreign businesses.

It, therefore, means that the price of an imported product would almost be at par with the that of a locally sourced good, increasing market access for entrants.

One of the things that make imported goods more costly than local products is the tariffs and taxes paid. A free trade agreement may reduce or abolish such tariffs, reducing the price of the import. This leads to stiff competition between the local products and imports.

The immediate impact of the AfCFTA is increased market access for businesses.

Some markets were difficult to access due to trade barriers, which made it very difficult for foreign businesses to operate. It will now be easier to export products to these new markets. It will also be easier for Kenyan businesses to import products from other African countries at a cheaper rate.

Experts opine that the AfCFTA will greatly boost the manufacturing sector, leading to increased employment in the continent. There will be less reliance on imports from other economic and trade blocs and increased volume of intra-Africa trade. Also expected is immigration and emigration, increased movement of people and capital.

Kenyan businesses should position themselves for new opportunities that will be created under the AfCFTA.

Kenya has already ratified this agreement. The Gambia became the 22nd country to ratify the agreement in April, meaning it will soon enter into force.

This is the time to rethink your Africa business strategy.

Brace your business for new export markets in the continent. You can consider opening up new businesses in other African countries or forming strategic alliances with businesses in those countries. For Kenyan importers, this is the time to rethink your imports strategy.

There is a need to realign yourselves for more intra-African imports than reliance on products from other blocs.

Imports from other blocs may be more costly than intra-African imports, limiting the ability to compete with the rest of producers of similar products in the continent.

The agreement will be good for the consumers because they will have a wider selection of products at cheaper prices, fuelling competition. The AfCFTA will also strengthen Africa’s global voice in international trade.

The challenge of the agreement, however, would be in the threat it poses to local industries and goods arising from the influx of cheaper imports. Nigeria has cited this as one of the reasons for its cautious approach to the AfCFTA. Nigeria, Eritrea and Benin have not yet signed the agreement.

The pact may require a lot of legal reforms, for example, amendments of tariff and business association laws before it is fully implemented.